In the past, he says, a traditional manufacturer that was growing would add to its fleet of trucks to distribute products. But in the current highly competitive, just-in-time economy, demand is far likelier to surge and collapse on short notice. Today's asset can be tomorrow's millstone. In this scenario, that manufacturer is far better off establishing a relationship with a trucking company. "That resource becomes a 'utility,' " explains Casale. "Now it's just a matter of flipping a switch. You need 10 trucks this month and 22 the next. The how is someone else's problem; you focus on the what."
Casale points to three convergent forces that are driving the spread of outsourcing: a need to get to market very fast, the fact that processes inside companies are now highly complex, and a high rate of change. He concludes that for the typical company, which is just trying to make sales--let alone turn a profit--"it's the worst of all possible worlds." To overcome such harsh circumstances, every company needs to leverage all the expertise it can. "In the past, one of the keys to growth was to use other people's money--OPM. Now it's to use OPR--other people's resources."
And as it turns out, making resources available to other people is what R.C. Strickland is all about.
RESOURCE MANAGEMENT: What exactly does R.C. Strickland do? In simple terms it's a food broker, but cofounder Strickland, who launched the company six years ago, rejects that label. A broker, he notes, is the proverbial middleman between manufacturer and retailer, earning a small percentage on sales for putting the manufacturer's product in front of the retailer and hoping he will bite. It's a relationship long on volume and short on loyalty: food vendors can be quick to sign up with the next broker, who's always promising better access to bigger retailers.
Strickland has turned his back on such an arrangement (what he dubs "a bastard's business") and set out to craft interdependent relationships with those he does business with. The company currently works with 40 food producers and retailers (primarily supermarket chains in the Southeast). With R.C. Strickland you don't just get cheese delivered on time. You get a range of services, which include cost analysis, market research, strategic planning, and training. It's a system Strickland calls "resource management," and it offers a menu of services that support the sale of the product.
Strickland says the objective is not only to provide value-added services of the client's choosing but also to measure performance. "We get paid only for services we provide," says Strickland. "We fully disclose all commissions earned from vendors." A percentage of those commissions is then allocated to an account that both the vendor and the retailer, separately or jointly, can draw on to "buy" R.C. Strickland's services . (Strickland will not disclose the exact percentage.) He says, "We have a simple investment formula: 'Here are the resources we will make available to you.' We have a way of providing full accountability for every dollar we spend."
If customers invest in the right services offered by Strickland, then volume at the retail level should rise--in turn pulling more products out of the manufacturer's warehouse. Strickland then gets paid more as the vendor's sales rise, thereby allowing him to set aside larger sums to service the account. Resource management is a strategy that binds vendor, broker, and retailer in a common cause.
In a typical example, Food Lion recently sought to determine if it would be more profitable to shift the preparation of frozen desserts, handled on-site, to an outside contractor. Using its resource-management "credit" with R.C. Strickland as though it were drawing down on a bank account, the chain commissioned the broker to study the issue. Strickland recommended switching to an outside source. Says Strickland's vice-president of marketing, Alan Hamer: "We concluded that we could improve quality and availability while not harming gross margins." Experience has since proved Strickland's assessment correct.
Hamer describes the theory behind resource management as "open book and clear," which "encourages additional business." He says that traditional brokers, doing an unvarying amount of business with a client, haphazardly throw in money to support the account--a system Hamer describes as "being as coherent as airline-ticket pricing." In R.C. Strickland's case, he asserts, "it's a clear, ongoing business relationship."
In addition to masterminding a number of projects at the store level, Robert Strickland supplies Food Lion with a broad range of what he calls "management services." He says: "We have become an active part of their management team. We give them advice on strategic direction, the decision-making process, and what information systems they might need." (Food Lion declined to be interviewed for this story.)
A large chunk of the services Strickland provides to Food Lion is training. Last November and December, Food Lion opened 65 stores. Strickland, with just 25 employees, still provided personnel to train bakery employees for a week at each new store. He was able to cover all bases by borrowing 6 employees from Rich Products, a major R.C. Strickland vendor, which sells a lot of goods through Food Lion.
Peter Fleischer, former vice-president for strategic planning at Buffalo-based Rich Products, says R.C. Strickland helps Rich customize its product. With more than $1 billion in sales, Rich is one of the world's largest producers of frozen dough--among other things--which it sells in 61 countries. "They have added value on both sides of the equation by having an intimate knowledge of Rich's customers' needs and problems," says Fleischer. "They're able to really help get inside and do a lot of number crunching and market analysis that the chains don't have the time or ability to do. They make it possible for Rich to provide products that solve some kind of problem."
As Strickland adds value for his clients he is able to command more value for himself. The typical food broker earns between 1.5¢ and 3¢ per pound of commodities--cheese, meats, and so on--it distributes. R.C. Strickland, for taking a value-added initiative, can earn as much as 5% of the total market value it distributes, which works out to a margin that is three times the industry average in that particular area. Robert Strickland says he earns so much more because "we are asked to provide a lot more input." In some instances, his company serves as the complete sales arm of its vendor clients.
